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AN ACT
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relating to the authority of certain insurers to make investments |
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in bond exchange-traded funds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 424, Insurance Code, is |
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amended by adding Section 424.075 to read as follows: |
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Sec. 424.075. AUTHORIZED INVESTMENTS: BOND EXCHANGE-TRADED |
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FUNDS. (a) An insurer may invest the insurer's funds in excess of |
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minimum capital and surplus in shares of a bond exchange-traded |
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fund registered under the Investment Company Act of 1940 (15 U.S.C. |
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Section 80a-1 et seq.), as amended, if: |
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(1) the exchange-traded fund is solvent and reported |
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at least $100 million of net assets in the exchange-traded fund's |
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latest annual or more recent certified audited financial statement; |
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(2) the securities valuation office has designated the |
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exchange-traded fund as meeting the criteria to be placed on the |
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list promulgated by the securities valuation office of |
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exchange-traded funds eligible for reporting as a long-term bond in |
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the Purposes and Procedures Manual of the securities valuation |
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office or a successor publication; and |
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(3) the amount of the insurer's investment in the |
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exchange-traded fund does not exceed 15 percent of the insurer's |
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capital and surplus. |
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(b) This section does not authorize an insurer to invest in |
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a bond exchange-traded fund that has: |
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(1) embedded structural features designed to deliver |
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performance that does not track the full unlevered and positive |
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return of the underlying index or exposure, including a leveraged |
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or inverse exchange-traded fund; or |
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(2) an expense ratio in excess of 100 basis points. |
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(c) An insurer may deposit with the department shares of a |
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bond exchange-traded fund described by Subsection (a) as a |
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statutory deposit if state law requires a statutory deposit from |
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the insurer. |
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SECTION 2. Subchapter C, Chapter 425, Insurance Code, is |
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amended by adding Section 425.1231 to read as follows: |
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Sec. 425.1231. AUTHORIZED INVESTMENTS: BOND |
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EXCHANGE-TRADED FUNDS. (a) An insurance company may invest the |
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insurer's funds in excess of minimum capital and surplus in shares |
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of a bond exchange-traded fund registered under the Investment |
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Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended, |
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if: |
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(1) the exchange-traded fund is solvent and reported |
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at least $100 million of net assets in the exchange-traded fund's |
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latest annual or more recent certified audited financial statement; |
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(2) the securities valuation office has designated the |
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exchange-traded fund as meeting the criteria to be placed on the |
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list promulgated by the securities valuation office of |
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exchange-traded funds eligible for reporting as a long-term bond in |
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the Purposes and Procedures Manual of the securities valuation |
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office or a successor publication; and |
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(3) the amount of the insurance company's investment |
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in the exchange-traded fund does not exceed 15 percent of the |
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insurance company's capital and surplus. |
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(b) This section does not authorize an insurance company to |
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invest in a bond exchange-traded fund that has: |
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(1) embedded structural features designed to deliver |
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performance that does not track the full unlevered and positive |
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return of the underlying index or exposure, including a leveraged |
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or inverse exchange-traded fund; or |
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(2) an expense ratio in excess of 100 basis points. |
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(c) A bond exchange-traded fund described by Subsection (a) |
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shall be considered a business entity for purposes of Section |
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425.110. |
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(d) An insurance company may deposit with the department |
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shares of a bond exchange-traded fund described by Subsection (a) |
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as a statutory deposit if state law requires a statutory deposit |
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from the insurance company. |
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SECTION 3. |
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Subchapter D, Chapter 425, Insurance Code, is |
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amended by adding Section 425.2061 to read as follows: |
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Sec. 425.2061. AUTHORIZED INVESTMENTS FOR ALL FUNDS: BOND |
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EXCHANGE-TRADED FUNDS. Subject to Section 425.157(b), an insurer |
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may invest any of the insurer's funds and accumulations in a bond |
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exchange-traded fund described by Section 425.1231(a). |
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SECTION 4. This Act takes effect September 1, 2019. |
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______________________________ |
______________________________ |
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President of the Senate |
Speaker of the House |
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I certify that H.B. No. 2694 was passed by the House on April |
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26, 2019, by the following vote: Yeas 139, Nays 0, 2 present, not |
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voting; and that the House concurred in Senate amendments to H.B. |
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No. 2694 on May 22, 2019, by the following vote: Yeas 144, Nays 0, |
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1 present, not voting. |
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______________________________ |
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Chief Clerk of the House |
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I certify that H.B. No. 2694 was passed by the Senate, with |
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amendments, on May 14, 2019, by the following vote: Yeas 31, Nays |
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0. |
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______________________________ |
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Secretary of the Senate |
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APPROVED: __________________ |
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Date |
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__________________ |
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Governor |